Restaurant stocks fall as investors fear recession, sales slowdown

Restaurant stocks fall as investors fear recession, sales slowdown


Following announcements of layoffs, a Starbucks store is shown in Encinitas, California, U.S., February 24, 2025. REUTERS/Mike Blake

Mike Blake | Reuters

Restaurant stocks fell in morning trading Monday, fueled by investors’ fears that a recession is coming.

U.S. stocks have tumbled for three consecutive days after President Donald Trump shocked the markets with high tariffs on goods imported from key trading partners. While analysts do not expect the tariffs to hit most restaurant companies directly, the inflation that is expected to follow would put pressure on consumers’ wallets and could lead to an economic downturn.

“We view the direct cost impact of tariffs on restaurants as manageable, with a focus on select commodity costs, but see the bigger risk as incremental pressure on consumer spending and industry demand,” UBS analyst Dennis Geiger wrote in a note to clients on Monday.

Investor concerns hit restaurant stocks across all sectors.

Shares of Starbucks fell more than 3%, following a downgrade to neutral from Baird, citing near-term economic headwinds. The coffee chain, which is already attempting to turn around its U.S. business, has seen its stock sink nearly 20% since Trump unveiled the new tariffs.

“Explanations for the drawdown we heard included higher coffee costs from tariffs, anti-American sentiment, and recession risk,” Bank of America Securities analyst Sara Senatore wrote in a research note on Saturday.

Most of the world’s coffee is grown in an equatorial region that spans Latin America, the Asia-Pacific region and Africa known as the Coffee Belt. Last week, Trump slapped higher tariffs on key coffee exporters like Vietnam, Brazil and Switzerland, where beans are roasted. Like bananas and vanilla, coffee production cannot be easily shifted to the U.S. because of high domestic demand and climate limitations.

Trade tensions also put Starbucks’ international sales at risk. Consumers in China, the company’s second-largest market, have boycotted Western brands previously for political reasons.

A sign is posted in front of an Applebee’s restaurant on June 12, 2024 in Hayward, California.

Justin Sullivan | Getty Images

Casual dining chains also took a tumble. Shares of Dine Brands, which owns Applebee’s and IHOP, sank nearly 3%, while rivals Darden Restaurants and Texas Roadhouse dropped more than 2% and 3%, respectively.

Fast-casual stocks, a recent favorite of investors, also slipped. Chipotle shares slid nearly 2%, Sweetgreen’s stock fell close to 1% and shares of Wingstop sank 3%.

Fast-food stocks were not spared from Monday’s declines. Shares of McDonald’s, Restaurant Brands International and Yum Brands all dipped in morning trading.

Historically, fast-food chains have fared the best during recessions as diners seeking cheap meals trade down from full-service or fast-casual eateries to McDonald’s or Taco Bell. But last year’s pullback in consumer spending saw fast-food eateries hit hard. Low-income consumers visited less frequently and pared back their orders, while consumers with higher incomes stuck to their usual dining habits, leading to same-store sales declines for quick-service restaurants.

Few restaurant stocks were in the green. Shares of Dutch Bros., a fast-growing rival of Starbucks, rose more than 3% in morning trading after tumbling nearly 10% on Friday. Cava gained more than 3%, while Domino’s Pizza rose slightly.

Don’t miss these insights from CNBC PRO



Source

Here are the retailers raising prices as Trump tariffs take hold
Business

Here are the retailers raising prices as Trump tariffs take hold

A person picks out clothing in a store as retailers compete to attract shoppers and try to maintain margins on Black Friday, one of the busiest shopping days of the year, at Woodbury Common Premium Outlets in Central Valley, New York, U.S. November 24, 2023.  Vincent Alban | Reuters Consumers who hoped tariffs would not […]

Read More
This is why Jamie Dimon is so gloomy on the economy
Business

This is why Jamie Dimon is so gloomy on the economy

Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, in the Hart Building on Dec. 6, 2023. Tom Williams | Cq-roll Call, Inc. | Getty Images The more Jamie Dimon worries, the better his bank seems to do. As JPMorgan […]

Read More
Summer rentals in the Hamptons are down 30%
Business

Summer rentals in the Hamptons are down 30%

Key Points Summer rentals in the Hamptons are down 30% from the same period in previous years, according to Judi Desiderio of William Raveis Real Estate. Brokers who focus on ultra-high-end rentals are seeing an even bigger drop and say their rental business is down between 50% and 75%. Some renters may be holding out […]

Read More